New S.C. pension consultant gets more pay, responsibilities

COLUMBIA — South Carolina’s new retirement fund consultant will make more than a quarter million dollars more than its predecessor, but state officials say the firm will earn its keep.

“The new contract demands more from our consultants and in all honesty they will earn every penny of their fees,” said S.C. Treasurer Curtis Loftis.

The S.C. Retirement System Investment Commission voted unanimously recently to switch from the only advisor the commission had used since its inception in 2005, New England Pension Consultants, to Hewitt EnnisKnupp.

The firm, like New England Pension Consultants before it, will help the commission choose how to invest the state’s $25 billion retirement fund and examine commission policies and governance.

But Hewitt will take on an expanded role that includes increased due diligence research of investment managers, re-evaluation of fees and expenses and “enhanced” recommendations on how the retirement fund should be invested, according to commission Chairman Reynolds Williams.

Hewitt will be paid $865,000 for the first three years of its five-year contract with the commission. In year four the firm will receive $900,000. In year five and possible additional years, Hewitt will make $950,000.

New England Pension Consultants made about $580,000 annually.

Hewitt’s added responsibility includes work in several areas Loftis has raised concerns about in recent months.

Loftis, the only elected official serving on the commission, has repeatedly clashed with other commissioners including Williams and commission staffers.

Loftis has argued the commission pays too much in fees to its many fund managers — $325 million in fiscal year 2011 — and is too secretive in the way it handles fund contracts.

“We have an overly complex portfolio that creates risk for the system and the taxpayers,” Loftis said. “I personally questioned Hewitt about their commitment to ethical standards and found them to be sincere and enthusiastic about setting the bar high and ensuring that South Carolina (uses) best practices in these areas.”

Other commissioners have disputed Loftis’ assessment, saying increasing payments to fund managers are a reflection of improving performance.

But the agreement with Hewitt comes after a year in which the commission’s return on investment fell well short of expectations.

The retirement fund made $87 million last fiscal year, a rate of return of 0.37 percent.

The General Assembly had expected a return of 7.5 percent. The fund’s value declined by about $1 billion because it paid out $1 billion more than it received in contributions, according to commission staff.

Several other states across the country also failed to hit their retirement investment return goals last year.

Reach Stephen Largen at 864-641-8172 and follow him on Twitter@stephenlargen.